Nvidia Could See 'Sell the News' Earnings as Doubts Become Extreme

The week started with new highs for the S&P 500 on Monday morning, but it was downhill for the rest of the week. The good news is that dip buyers jumped in on the downgrade of U.S. debt on Monday morning and then again on Friday after President Trump stirred up some tariff turmoil once again. Weakness in bonds and higher interest rates were too much of a headwind for the equity bulls to overcome.

The S&P 500 found support in the middle of the gap that was created on Monday, May 12, when the China tariffs were suspended. This support is also at the 200-day simple moving average, which is a significant level. The conventional wisdom is that a gap on the chart like this will be filled, and it is very rare for it to be only partially filled. This adds an ominous aspect to the S&P 500 chart, but the dip buyers have been surprisingly resilient and have done a nice job of preventing more technical damage.

Following the three-day Memorial Day weekend, the big event will be Nvidia NVDA earnings after the close on Wednesday night. The Magnificent Seven MAGS names and semiconductors SMH have regained their luster recently but lagged badly on Friday. The Nvidia report will be a good test of sentiment. The potential for a "sell the news" reaction cannot be ruled out.

Market players continue to grapple with some very clear negatives, such as uncertainty about tariffs, the potential for economic slowing and higher interest rates. These fundamental concerns haven’t mattered yet, and there is no hard data to back up the negativity, but expectations of some poor data are very high. That could be a catalyst for more upside if the bears are trapped, but the doubts about continued economic strength are very extreme.

Have a great holiday. I will see you on Tuesday.

At the time of publication, DePorre had no positions in any securities mentioned.